Andrew Hagger comments on today’s announcement that the government is launching a consultation looking at including Peer to Peer lending within ISAs.
Being able to put P2P savings into the ISA tax free wrapper would be a huge shot in the arm for the established providers in what is already a rapidly growing sector.
RateSetter alone is currently seeing inflows of more than £30 million pounds per month.
With interest rates on cash ISA products at rock bottom, the option to be able to tap into an alternative market and earn a far greater return will undoubtedly appeal to savers seeking improved returns.
Banks seem to have lost interest in retail savings and this could play into the hands of P2P providers with more streamline business models, lower overheads and very attractive interest rates.
Whilst there is no cast iron FSCS guarantee in place with P2P the most popular consumer based P2P sites, RateSetter and Zopa manage the safety of their savers money by using their provision fund and safeguard funds accordingly.
If the rates available from the P2P players were available today, the table below shows how the returns would fare compared with the best buy fixed rate ISAs.
|1 year fixed rate ISA|
|Provider||Rate||Annual interest on £5000||Annual interest on £15000|
|5 year fixed rate ISA|
|Provider||Rate||5 years interest on £5000 (exc compounding)||5 years interest on £15000 (exc compounding)|
|Principality Building Society||2.75%||£687.50||£2062.50|